When Credit Ratings Lose Their Meaning – BusinessWeek.
Posted by exitlanguages
Which is a safer investment: A Treasury bonds, backed by the full faith and credit of the U.S. government, or B securities backed by subprime loans, the same type of investments that led to the worst financial crisis since the Great Depression? For ratings company Standard & Poor’s, the answer is B.
S&P stripped the U.S. of its top grade, AAA, on Aug. 5, saying Washington politics was making the country less creditworthy. Meanwhile, the company has stamped AAA on more than $36 billion of U.S. securitized debt this year, according to data compiled by Bloomberg. Overall, some 14,000 securitized bonds, backed by everything from houses and malls to auto-dealer loans, carry the AAA rating from S&P. They are created by bankers who gather thousands of loans, package them into bonds, slice them into pieces of varying risk, and pay ratings firms a fee to evaluate them. S&P is not paid for rating U.S. government debt.
Strange Random Ratings Quote:
Facts are, insurance ratings are really dependent on the notion that some people are higher risk than others. – Patrick J. Kennedy
- Singapore’s Strong Ratings a Strong Traction for Foreign Investors and Enterprises Says Rikvin Consultancy (prweb.com)
- Dagong Grants Small Firms AAA Grade Denied to U.S.: China Credit (businessweek.com)
- U.S. Credit Downgrade Could Lead to Surprise Moves by Bond Mutual Funds: Could This Keep Interest Rates Low on U.S. Debt.? (prweb.com)
- Qld credit rating stable (news.theage.com.au)
- Fitch warns of downgrades for China, Japan (huffingtonpost.com)
- Subprime Mortgage-Backed Security to Get Higher Credit Rating From S&P Than US (blogs.wsj.com)
- Do Credit Ratings Still Have Meaning? (huffingtonpost.com)
Posted on September 8, 2011, in Article and tagged Bond credit rating, Credit rating, Great Depression, Patrick J. Kennedy, Standard & Poor's, Subprime lending, United States public debt, United States Treasury security. Bookmark the permalink. Leave a comment.